Gov. Phil Murphy is hoping to lure new investors to some of the state’s oldest buildings, touting a proposed historic preservation tax credit as part of his plan to overhaul New Jersey’s embattled incentive programs.

The second-year governor on Friday visited Paterson, the home of silk mills and other historic structures, to detail a proposal for restoring such properties. Joining other public officials, Murphy unveiled legislation that would allocate up to $20 million in tax credits annually to help developers or tenants close a financing gap when rehabilitating certain buildings or sites.

According to the bill, a developer can receive up to $4 million in historic preservation tax credits for an eligible rehabilitation project. The value of the credit will equal 16 percent of the actual or projected cost of a project as outlined in a rehabilitation agreement, whichever is less, or 20 percent if it includes affordable housing or a facility such as collaborative workspace or incubator.

Murphy discussed the plan at a historic property at 50 Spruce St., which he said “is one of hundreds, if not thousands of similar buildings in our state that have vast unfulfilled potential and can be restored to their former glory and repurposed for modern day use.”

“Historic preservation tax credits have helped other states preserve and utilize their historic buildings,” Murphy said. “These beautiful structures are often hidden in plain sight and are waiting for the right investor. We are here to help with that.”

The proposal comes amid the governor’s push to revamp New Jersey’s incentives for businesses and developers, which have come under fire in recent weeks. A scathing state comptroller’s audit released in early January blasted the Economic Development Authority for its oversight of the programs, which became a focal point during Murphy’s subsequent State of the State address.

But his proposals for new incentives predate the comptroller’s report. Last fall, he outlined a series of new programs to replace the Grow New Jersey and Economic Redevelopment and Growth programs with platforms known as NJ Forward and NJ Aspire, respectively, while adding new options such as a historic preservation tax credit.

The bill detailed by Murphy on Friday requires developers or occupants seeking to rehab a historic property to apply by June 30, 2024. Before doing so, they must account for all other sources of capital, including at least 20 percent of their own contributed capital.

The legislation also effectively mandates union labor by requiring developers to pay a prevailing wage rate for construction work at such projects.

The EDA would have oversight of the program, which would include approving applications, entering into rehabilitation agreements with applicants and issuing the tax credits after certification of the project. Aside from specifying the amount of the tax credit award, rehabilitation agreements would include a required completion date and the projected cost of restoration.

Developers must then submit progress information to the EDA every six months until completion, while the authority would then certify that the project meets certain requirements upon completion.

“The Historic Tax Credit Program proposed by Governor Murphy would be a powerful tool for revitalizing New Jersey’s urban centers while upholding its storied past,” said Tim Sullivan, the authority’s CEO. “The proposed program’s thoughtful, targeted approach will help to ensure the kind of innovation-focused investment that will spur sustainable economic activity.”

Developers in New Jersey have long used federal historic tax credits as part of their capital stack. On Friday, Murphy and other officials noted that it is among only about 15 states that do not have their own version of the program.

“Preservation of historic sites like 50 Spruce Street contributes to our sense of community and honors those generations that came before us,” said Rep. Bill Pascrell, who sits on the House Ways and Means Committee. “A Historic Preservation Tax Credit will help to revitalize our cities and towns through spurred economic development and the creation of local jobs.

“I want to thank Governor Murphy for selecting my hometown of Paterson for this special announcement, evoking memories of the Silk City’s industrial roots while acknowledging its bright future. Establishment of this tax credit is a bold and positive step for our state and I will continue to fight tooth and nail for its protection on the federal level.”

Joshua Burd, an award-winning reporter and editor, has been covering New Jersey commercial real estate for five years. Many industry leaders view him as the go-to real estate reporter in the state, a role he is eager to continue as the editor of Real Estate NJ. He is a lifelong New Jersey resident who has spent a decade covering the great Garden State.